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November 14, 2019 11:15 AM, EST

October Class 8 Sales Show Capacity Expands

A Volvo truck on road next to waterA Volvo VNL760. Volvo Trucks North America was the one truck maker that saw year-over-year sales increase in October, though just slightly, from 2,215 to 2,248. (Volvo Trucks)

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Class 8 sales for October, a month after setting the all-time record, failed to match that heady pace but cleared 23,000, WardsAuto.com reported, in a sign capacity continues to grow.

Sales hit 23,001, down 8% compared with 25,007 a year earlier, according to Ward’s. In September, they soared to 28,258.

All truck makers posted lower year-over-year sales except Volvo Trucks North America, which rose 1.5%.

Steve Tam of ACT Research

Tam

ACT Research Vice President Steve Tam said of October, “It’s a good number, but I think you are starting to see a little reflection from the truck-buying public that we are heading into that impending slowdown.”

Looking to 2020, gross domestic product growth in all three North American economies is anticipated to fall below 2%, with the U.S. and Canada at 1.7% and Mexico rebounding to 1.4%, according to ACT. The research firm noted the trade war with China still is the biggest risk to the economy.

Another analyst held a similar view on October’s volume.

“They looked pretty good,” said Don Ake, vice president of commercial vehicles at FTR. “It shows the market is not falling apart. The freight market has slowed and softened, but fleets continue to take new equipment for replacement and, possibly, some expansion at this point.”

Don Ake

Ake

The U.S. replacement level is accepted to be about 16,000 units a month. Class 8 sales have posted in the low-to-mid 20,000 range in every month but two since June 2018, including September’s record and sales of 19,858 in February.

Ake said we are seeing the last remnants of the ordering binge that ran from October 2017 to October 2018 then sharply dropped off. He said he expected sales to decline in November, bounce back in December, then fall off significantly in January.

“The way we are looking at it,” Tam said, “is if you look at the publicly traded fleets, these guys are set for a 6.5% profit margin this year. So they are really still making, despite the fact that their business is down, really good money.

“And when it comes right down to it, the last thing they want to do is pay taxes on that profit. So they reinvest their profits in equipment, and that equipment is typically trucks and trailers.”

Year-to-date Class 8 sales improved 15.5% to 234,721 compared with a year earlier.

ACT forecasts U.S. retail sales in 2020 will fall to 202,000.

In October, VTNA notched sales of 2,248 compared with 2,215 a year earlier, good for a 9.8% market share. VTNA is a unit of Volvo Group.

“We have been losing a little bit of market share during the course of the year,” Volvo Group CEO Martin Lundstedt said in a recent earnings call. “We have discussed that before. We have stabilized that situation now. We are not dropping. We have put priority on price realization.”

Volvo Group CEO Martin Lundstedt

Lundstedt

Mack Trucks, also a unit of Volvo Group, sold 1,224 trucks, down 12.8% from a year earlier, as it posted a 5.3% share. Mack was shut down for 12 days in October as UAW workers went on strike at its operations in Pennsylvania, Maryland and Florida. VTNA was shut down, too, as the flow of its engines and transmissions built in Maryland stopped.

Daimler Trucks North America, a unit of Daimler AG, sold the most heavy-duty trucks with 7,673 but fell a leading 13.6% as it earned a 33.4% share.

Daimler Chief Financial Officer Harald Wilhelm, during the company’s latest earnings call, said, “I think the good news is our, U.S., the NAFTA, business is actually very strong, and the profitability is, I think, at real benchmark level.”

Western Star, also a unit of DTNA, saw sales slip 0.2% to 471 trucks for a 2% share.

International posted sales of 4,609, down 4.1% from a year earlier. It earned a 20% share as parent company Navistar Inc. concluded its fiscal year Oct. 31.

Kenworth Truck Co. sold 3,332 trucks, slipping 5.5% from a year earlier, and pulled down a 14.5% share.

Peterbilt Motors Co. saw sales drop 7.1% to 3,444, good for a 15% share.

Kenworth and Peterbilt are brands of Paccar Inc.

“We just have 2.4 months of inventory retail sales sitting out there, so that’s a nice level,” Paccar CEO Preston Feight said in a recent earnings call. “And then as we look forward and think about build rates, we took adjustments into the end of the third quarter, in both North America and Europe, to get them right for the markets. So we feel like we’ve got a reasonable build going into 2020.”

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